BIM15010 - Trade profits: scope
SS5, 6, 7(5) Income (Trading and Other Income) Act 2005; SS5, 19, 35 Corporation Tax Act 2009
Income Tax
The profits of a trade arising to a UK resident are chargeable to tax wherever the trade is carried on.
The profits of a trade arising to a non-UK resident are chargeable to tax only if they arise either:
(a) from a trade carried on wholly in the UK; or
(b) where a trade is carried on only partly in the UK, from the part carried on in the UK.
In other words, the profits derived by the non-resident from trading outside the UK are not chargeable.
If a resident of the UK carries on a trade wholly abroad they are able to claim some additional deductions in computing the profits – see BIM47712. Also, the profits of a trade carried on wholly abroad are qualifying foreign income for the purposes of the foreign income and gains (FIG) regime. The FIG regime enables ‘qualifying new residents’ to claim relief on eligible foreign income and gains in their first 4 tax years of UK residence after 10 consecutive tax years of non-UK residence. For information about the FIG regime see RFIG40000 in the Residence and FIG Regime Manual. Before 6 April 2025, such profits could have been charged on the remittance basis. For the remittance basis see the Remittance Basis and Domicile Manual.
Where an individual carries on a trade partly in the UK and partly abroad, none of the profits are qualifying foreign income for the FIG regime (nor could any of the profits be charged on the remittance basis). The trade must be carried on wholly abroad and cannot be split for FIG regime (or remittance basis) purposes.
The treatment of profits from trading within the UK by non-residents is dealt with in more detail in the International Manual.
Corporation Tax
The statute imposing the charge to Corporation Tax on the profits of a trade does not include any territorial restrictions. The general Corporation Tax provisions restricting the scope of the tax therefore apply.
A UK resident company is chargeable to Corporation Tax on all its profits wherever arising. There is however an exemption from the charge for profits of foreign permanent establishments which applies by election. See the International Manual.
A non-UK resident company is chargeable to Corporation Tax only if it carries on a trade in the UK through a permanent establishment in the UK. The chargeable profits of such a company include trading income arising directly or indirectly through or from the permanent establishment. See the International Manual.